A cynical commentary about developments in the South African financial markets and the incomprehensible activities and pronouncements of bureaucrats and politicians.

Friday, 2 February 2018

TOO MUCH INFORMATION

Someone has definitely prodded the bear and he’s out and about,
rolling boulders and uprooting shrubs looking for the value that the equity
market valuations promise. President Trump’s holiday on Wall Street is ending
and the bill has been slid under the door of the honeymoon suite. US bond
yields are at a 4 year high. Commodity prices are pushing higher. There is some
evidence of a mistrust of “synthetic” instruments. These are the sometimes-complicated
securities manufactured by the propeller heads to amplify the modest price
moves of the underlying conventional shares or commodities. Sleep with one eye open, folks.

The
ease with which a hitherto unknown outfit like Viceroy can sow widespread doubt
about listed companies is very interesting. It’s not unlike what’s happening in
the Bitcoin market where in the absence of any recognised method for valuing
these intangible beasties, just about any number seems to do. In the case of a
listed company like Capitec Bank, however, there are published numbers and
common methodologies. Nevertheless, banks are notoriously difficult entities on
which to carry out a financial analysis as they can legally (perhaps) shift and
rename troves of value and pockets of impairment (a polite term for dud loans)
from one reporting period to the next. A few years ago, one of the big four banks
sent shareholders an annual report weighing more than kilogram. Plenty of hidey-holes
in that document to stash some skeletons.

Whether
or not Viceroy have uncovered some moth-eaten donkeys in the Capitec stable of
thoroughbreds will emerge for those of us on the outside (customers and
shareholders) in due course. In the meantime, the sheriff is charging around
firing into the air and threatening insiders with a plot on boot hill. He has
little chance of success.

Multichoice, the privately-owned satellite digital broadcast
system has told ANN7 that it will from August no longer provide them with a
channel. Given the many strange TV stations that it does already broadcast to
much of Africa and that this rather suspect and partisan news station is (in a
roundabout way) owned by pals of Number One, it is safe to suggest that Multichoice’s
decision is not entirely a commercial one. If the government had only carried out its
international obligation two years ago to have in place a publicly owned terrestrial
digital broadcast system, then ANN7 would now have an alternative method
for reaching its meagre audience of cabinet ministers eager to see themselves
on TV.

Dismissed or suspended senior staff members at state owned
enterprises often challenge their suspension or dismissal with such zeal that
it suggests either that they really are not guilty or that they know how tough it will be no longer to
have a highly paid job with opportunities for patronage. Mind you its astonishing
how often a dismissed and disgraced cadre, finally deemed unqualified, incompetent
or sufficiently corrupt by one branch of government pops up in another.
Diplomatic posting as ambassador to a country commercially important to us is a
frequent reward.

SARS,
the nation’s tax collector, is so desperate for funds that it appears to be on
the point of stirring up a whole heap of trouble. It wants to have a close look
at whether all the hundreds of churches in the country are being totally honest
about their tax affairs. SARS too must have been intrigued by the sight of a
humble rural pastor sliding out from behind the wheel of a Lamborghini. The
heart of the problem is that religious institutions can apply to be exempted
from various taxes and fiddling with that piece of legislation is going to face
fierce opposition. Just defining such an institution is a several thousand-year-old
problem.

The
Proteas were handed a drubbing by India in the first ODI of a lengthy series. We
didn’t look too clever in the third test either. It’s a funny game, cricket.
This is going to be a tough summer if we have to watch more of this in the
coming weeks. Already, however, the captain is telling everyone that he is
focussing on the World Cup next year!